I would say stay put for a while or sell now for a loss. The stars have to align perfect for what you want to pull off. If you are self employed, recently changed jobs, less then excellent credit, or already have a high debt to income ratio then it gets even harder. If none of the prior applies and you consistently make $200k+ a yr then it should become easier.
You will only know if it’s a wise decision by seeing what amounts you can get approved for and the program/rate. Since you need equity from current home for DP you would first have to get approved for equity loan, line of credit, or cash out refi. Once closed on loan/line you need to see what your max approval price is for 2nd property. I believe lenders are going to treat this as an investment property loan and probably will not consider future rental income so it’s much harder to qualify for amount needed to purchase $850k home. To keep rate & closing cost low you typically need 25%-30% down payment. Check local credit unions and aimloan.com for HELOC & Cash Out Refi rates.
If you were able to pull that off & own 2 properties, you now have much more debt and are a landlord in need of finding good consistent tenants. You also need home to increase $100k in next 5yrs so that you don’t lose that DP equity. A 15% recovery within 5yrs is not a bet I would personally make. It’s possible but that would be on the higher end for most bulls & you know what the bears are thinking. Certain areas will rebound better than others. As mentioned earlier your loss is somewhat locked in because if your home goes up 15% then good chance “trade up” home will increase similar %.
If you just don’t want to stay in current home, it might be best to sell for a loss. Then you can target homes in the $750k-$1MM range and wait until one lowball gets accepted and you made up for the prior loss. More deals & less competition in the higher price ranges. Downside is that you have to rent for a while and need to be patient as it could take many offers to find great deal.
